The recent rise in equity prices has led many pundits to see more signs of stabilization in the economy. The latest Wall Street Journal forecasting survey of economists calls for the recession (I call it the recession/depression) to end in September 2009, and they feel it will be the second half of 2010 before the unemployment situation begins to visibly improve.

I agree that all the fiscal stimuli, support to the mortgage market, quantitative easing, etc. will give rise to an interim upward bounce in the economy in the second half of 2009. But, the beginnings of a sustained economic recovery will, in my view, have to wait until the first quarter of 2011, or possibly the final quarter of 2010.

The February trade deficit, released on April 9, fell far more than consensus or my own expectations. The trade deficit fell to $26 billion from $36.2 billion in January.

Yes, it's a plus that US exports turned upward for the first time since July 2008. But, the dramatic improvement in the trade deficit came from a sharp contraction in US imports, a clear manifestation of the severity of the U.S. recession/depression, i.e., the abysmal condition of domestic demand.

The trade deficit suggests that first quarter 2009 real GDP (released April 29) will be less negative than my prior estimate of an annualized 7.0% decline. I now anticipate an annualized decline of 5.5% in real GDP in 1Q:'09.

March import prices, also released on April 9 managed to increase, because of energy prices. The advance in import prices, while only 0.5%, was the first rise in import prices since last July. Apart from petroleum prices, import prices declined 0.7% from February, and are down

3.7% on a year-over-year (YoY) basis. This is a direct reflection of deflationary forces at play in the U.S. economy.

Initial jobless claims fell slightly in the statistical week ending April 4 to 654,000, better than expected. But, the four week moving average barely moved at 657,250. There is no indication that the pace of layoffs is slowing, in fact layoffs are accelerating.

Continuing unemployment claims advanced 95,000 in the week ending April 4 to move north of 5.8 million. This yardstick has reached new highs in ten straight weeks. The deterioration in the labor markets is intensifying.

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